Question

A company purchased inventory on account for 250,000. The company returned 20,000 of the inventory to the supplier for credit. Record (1) the purchase of inventory on account and (2) the purchase return, assuming the company uses a perpetual inventory system.

Answer 1

In a perpetual inventory system, a purchase of inventory on account is recorded by debiting the inventory account and crediting the accounts payable account. A purchase return is recorded by crediting the inventory account and debiting the accounts payable account.

Step-by-step explanation:

In a perpetual inventory system, we record the purchase of inventory on account by increasing the inventory account and the accounts payable account. Since the company purchased inventory on account for $250,000, we would debit the inventory account for $250,000 and credit the accounts payable account for the same amount.

When the company returns $20,000 of inventory to the supplier for credit, we need to record the purchase return by decreasing the inventory account and decreasing the accounts payable account. We would credit the inventory account for $20,000 and debit the accounts payable account for the same amount.